Microsoft's Big Plans for Xbox

SEATTLE – Anyone who snagged one of Microsoft Corp.'s new Xbox 360s at its Tuesday debut will likely see the new video game console as just that — a medium for spending hours playing the likes of "Halo 2" and "Project Gotham Racing 3."

But executives at Microsoft see video games as just the beginning. The Xbox 360 is at the center of a strategy that will also eventually tie in elements of Microsoft's new online initiative, called Windows Live, says company Chairman Bill Gates.

Gates said Monday that he expects Xbox Live, Microsoft's service that allows gamers worldwide to play one another, to eventually work with a Microsoft instant messenger that is slated to become part of Windows Live.

Microsoft already offers limited ways for people on Xbox Live to communicate with those on Microsoft's messaging software, but the new offering — not yet slated for release — would expand that significantly.

Gates said he's also expecting a new Xbox service called Microsoft Points, which lets people pre-pay for things like virtual armor or other game-related items, to eventually work with Windows Live, so people could use a single account to pay for offerings there, too.

"The PC and the Xbox are very complementary," Gates told The Associated Press.

Stores around the country were selling the Xbox consoles to the first customers at midnight. In midtown Manhattan, 200 people lined up around a block in the rain outside a Best Buy late Monday.

"You gotta have it," said a drenched Michael Hamilton, 25, of Brooklyn, who had been waiting on line since 1:30 a.m. Monday. Wearing a poncho that did little to keep him dry, Hamilton said, "Rain? It's only water."

"This is the home stretch. I've been here for 15 hours," said Viktor Lundberg, 28, of Manhattan. "I wouldn't wait in the rain for a Sega or a Nintendo."

Carlos Serrano, the store's "customer experience" manager, called the people on line "crazy and dedicated."

"They are going to get this system right when they want it: 12:01," Serrano said.

Windows Live is Microsoft's newly launched effort to better compete with free, advertising-financed Web services like e-mail and search technology from competitors led by Google Inc. and Yahoo Inc.

Analyst Rob Enderle said the move to more closely link Xbox Live with Windows Live intends to bolster loyalty to Microsoft products. Microsoft "can tie that stuff together so that you as a customer become wedded to the Microsoft platform for everything you do," he said.

Microsoft also is attempting to more closely tie Xbox 360 to the rest of its universe by trying to make it a conduit for other entertainment activities such as watching high-definition TV, looking at family photos and listening to music.

Xbox 360 can do some of those tasks itself, and it also can function as an "extender" that links to a PC running Microsoft's entertainment-centric Windows XP Media Center Edition.

"In the living room itself, Xbox 360 is our centerpiece and a product that redefines what goes on there," Gates said.

Microsoft's major console rival, Sony Corp.'s PlayStation 3, also is expected to offer alluring digital entertainment capabilities when it debuts next year.

With the new Xbox system, Microsoft also is significantly expanding what people can do — and buy — from Xbox Live itself.

Gates said one big bet is that game companies will use Xbox Live to sell incremental upgrades and additions to existing games, thus extending a game's life.

Analyst Matt Rosoff with independent researchers Directions on Microsoft said efforts to sell game add-ons through Xbox Live are probably more likely to immediately meet success than the grander plans to become a home entertainment hub.

Microsoft — and Gates in particular — have long touted the idea of the high-tech living room and den, but the concept is still too geeky for most people, Rosoff said.

While Gates may spend lots of time thinking about how important Xbox is to his corporate strategy, the Microsoft co-founder said he doesn't have much time to play the game system himself.

"I'm not a heavy gamer, I'm a light gamer — something to do with my job," Gates said Tuesday. "... The people on [the Xbox] team can all kill me within about 60 seconds on Halo, so I try and avoid them."

Gates was staying up a little past his bedtime Monday to hand out some of the first Xbox 360 consoles to consumers in suburban Bellevue. Some retailers, including certain Best Buy and GameStop stores, were opening at midnight to sell consoles the moment they become available.

Back at his house in the upscale suburb of Medina, Gates said his three children are too young — the eldest is nine — for much Xbox play.

By contrast, Chief Executive Steve Ballmer has talked about how his older kids are much bigger fans of Xbox, so much so that Gates said the Ballmers have had to limit play time.